This paper uses the volatility surface data from options contracts to document a strong, robust, and positive cross-sectional relation between risk-neutral skewness (RNS) and subsequent stock returns. The differential return between high and low RNS stocks amounts to 0.17% per week....

There has been a long debate on the interpretation of idiosyncratic return variation. We inform this debate by examining the extent to which stock return synchronicity is associated with the post-earnings announcement drift (PEAD) in China. We find that firms with higher synchronicity exhibit...

We study an environment with short sale constraints and heterogeneous beliefs among outsiders and between insiders and outsiders. Firm insiders choose between equity, debt, and convertible debt to raise external financing. We analyze two settings: one where heterogeneous beliefs is the only...

We investigate the uncertainty dynamics surrounding extreme weather events through the lens of option and stock markets by identifying market responses to the uncertainty regarding both potential hurricane landfall and subsequent economic impact. Stock options on firms with establishments...

The prevailing view of implied volatility comovements, IVC, defined as the correlation between a firm's implied volatility and the market's implied volatility, is that they indicate the presence of systematic volatility risk to the firm's investors. We take a different stance and conjecture that...

Based on data until the mid 2000s, oil price changes were shown to predict international equity index returns with a negative predictive slope. Extending the sample to 2015, we document that this relationship has been reversed over the last ten years and therefore has not been stable over time....

Momentum stocks are exposed to aggregate volatility risk. This paper estimates an EGARCH model of market volatility to introduce a new volatility risk factor that prices itself, and thereby becomes a candidate risk factor for analyzing stock market anomalies such as momentum. Winners have...

In this note we document interactive relations between the excess volatility and the momentum effect in the cross-section of stock returns over the sample periods of 1963-1989, 1990-2010 and 1963-2010, along the line explored lately in Wang and Ma (2014). The nature of interactive relations...

This study examines the relation between aggregate volatility risk and the cross-section of stock returns in Australia. We use a stock's sensitivity to innovations in the ASX200 implied volatility (VIX) as a proxy for aggregate volatility risk. Consistent with theoretical predictions, aggregate...